PhD Research Sponsored by the Leverhulme TrustCornell Jackson

Strength of Weak Ties in Microfinance

BackgroundPart of Leverhulme Research Project

looking at microfinance & social networksPhD Research focused on the networks of

microfinance clientsResearch hosted by Bullock Cart Workers

Development Association (BWDA) located in Tamil Nadu, India

Social Network Analysis DefinitionSocial networks are defined and measured

as connections among people, organisations, political entities (states and nations) and/or other units.

Social networks are so important is because human beings are ultra-social animals that create social networks (Haidt, 2006)

Social network analysis is a theoretical perspective and a set of techniques used to understand these relationships (Valente 2010).

Social Network Analysis DefinitionSocial Network Analysis Definition

(Freeman, 2004)Social network analysis is motivated by a

structural intuition based on ties linking social actors,

It is grounded in systematic empirical data,It draws heavily on graphic imagery, andIt relies on the use of mathematical and/or

computational models

Social Network Analysis ConceptsSmall World NetworksScale Free NetworksNetwork Dynamics (individual, network)Social CapitalHomophilyDiffusion/ContagionCentralityEfficient Network FormsInterventions

Reach of Connection and InfluenceChristakis and Fowler (2010) propose the

following:Connection – Six degrees of separation

(Travers & Milgram (1969), Dodds, Muhamad and Watts(2003))

Influence – Three degrees of separationIntrinsic Decay Explanation Network Instability Explanation Evolutionary Purpose Explanation

Visualisations – Who Does the Most Work?

Visualisation – Who Does the Most Work?

Theoretical BackgroundStrength of Weak Ties (Granovetter, 1973)Reliance of the poor on strong ties

(Granovetter, 1983)Structural Holes (Burt, 1992)Brokerage & Closure (Burt, 2005)Spillover (Burt, 2010)Social Intermediation (Edgcomb & Barton,

1998)Inclusive Value Chains (Harper, 2010)Power Distance Index (Hofstede, 1984)

Research QuestionsHow does a MFI help its clients bridge

structural holes?How can MFIs socially intermediate to help

clients establish weak bridging ties?

MethodologyPopulation – 111 Sari Sellers MFI Clients in Tamil

Nadu Links to:

SuppliersFinancial SourcesCustomersMarket Information

Reverse Small World Method – Who would you talk to first?More customersMake your business betterTo find info on upcoming weddings and festivalsKanchipuram Silk Question

Methodology – Cont’dSocial Intermediation – Non-Financial AidJatiFinancials Progress Out of Poverty Index (PPI)

ResultsLarge reliance on strong tiesThe internal network of BWDA, like most

Indian organisations, has most links to and from the centre

Very few ties that cross the links to and from the centre

While only 5% of the population, animators (SHG leaders) are 55% of the sari sellers interviewed.

Results – Cont’dDefinition of Strong Ties (Trust):

Finance – Non-collateral loansSupplier – Credit providedRelationships – Family, Friends, Neighbours

or Long-termCustomers – Relationship > 1 year

Methodology – Cont’dKanchipuram Silk Sari Question

Visualisation – Target Method

Preliminary InterpretationsPoor depend mainly on strong ties. Mainly due to

insecurity (Granovetter, 1983)Indian hierarchical cultural ecosystems encourages

“command and control” network structures Sari sellers’ networks are fragile and easy to

fragmentContext is important. These sari sellers do not

recognise and take advantage of brokerage opportunitiesSouth Railway ColonyKanchipuram Silk Sari Question

Animators get the most training from BWDA.

Network Fragmentation I

Network Fragmentation II

Network Fragmentation III

Network Fragmentation IV

InterventionPilot Test

Attempt to get sari sellers to build weak bridging ties with other sari sellers and see how these impact business, networks and PPI

Use information and skills sari sellers want to entice bridge building

Villupuram treatment group and Pondicherry the control group

Assumption: BWDA internal network is a safe place to build weak, bridging ties

InterventionSari sellers have agreed to form an

association as a result of this research. BWDA is seriously consider buying saris

in bulk for sari sellers. Will not be part of PhD research. But shows how spillover could work.

ContributionIf research questions can be answered

successfully, microfinance institutions in India can help their clients develop the weak, bridging ties that could help increase their businesses and their poverty reduction.